Just Four China Charts

Sunday's 'golidlocks' data dump from China was enough for many to herald the turn is in and it's all plain-sailing from here, but the reality is a little different (as always). As Bloomberg's Michael McDonough notes, there is little upside for the yuan given China's slowing economy and a strengthening US Dollar. The gloomier outlook may also weigh on domestic equity markets. The Shanghai Composite Index has underperformed global peers in the past year. The pace of expansion may fall below the government’s goal of 7.5 percent and that may prompt a rate cut and/or an accelerated pace of infrastructure project approvals (unleashing the inflation monster). Policy makers need to prove they remain in control, meaning GDP growth must finish the year at or above the target, but for now, the following four charts suggest all is not well with the 'soft-landing'...

Via Bloomberg Brief's Michael McDonough (@M_McDonough),

GDP

While second-quarter GDP growth was in line with economists’ projections, there has been a sharp decline in the outlook since April. Bloomberg’s consensus forecast for 2013 expansion has dropped to 7.6 percent, close to the government’s 7.5 percent goal, from 8.1 percent in April. Worsening data may lead to additional downgrades and are likely to force policy makers to step up pro-growth measures to prevent the pace of expansion from falling below the official target.

Industrial Output

Industrial production ended the second quarter with a year-over-year increase of 8.9 percent in June, compared with the median forecast of 9.1 percent in a Bloomberg survey and the 9.2 percent pace in May. The slowing momentum is likely to continue in the third quarter as the manufacturing sector suffers from substantial overcapacity and tepid global demand. Output of steel products decelerated to 7.2 percent in June from 11.3 percent in May, echoing softness in the producer price index.

Retail Sales

Retail sales growth, which slowed over the past couple of years, has recovered from more sluggish increases earlier this year following the government’s efforts to reduce conspicuous spending by officials. Spending at restaurants rose 9.5 percent in June from a year earlier, versus 7.9 percent in April, which was one of the slowest paces on record. Retail sales may continue to pick up as policy makers stoke consumption in an effort to rebalance the economy.

Investment

Fixed asset investment continued to moderate in June, though it may improve in the second half of the year. To offset a worsening growth environment and to ensure GDP finishes 2013 at or above the target, policy makers may soon begin accelerating approvals for targeted infrastructure investment projects. Housing activity is also likely to support FAI in the coming months as prices continue climbing even after efforts by the government to curb the sector.

Notice the trends across all their data? The problem is - as we noted here - that none of this matters as "the economy is already in a financial crisis" Of course, as we have discussed previously the biggest fear for the Party in 'stimulating' is social unrest amid soaring inflation (and a deepening wealth divide)... perhaps this explains the increasing demand for physical gold that continues in China?